Legacy Research Group

Dave Forest: When most people invest in EVs (electric vehicles), they think about buying Tesla or Rivian (RIVN) – the companies that make the cars. But what about buying the companies that make the charging infrastructure?

I’m sure you’ve seen it. As we walk around, we see more and more of these charging stations in every city around the planet.

Somebody is putting those and maintaining them. And now we have ones that have screens and show advertising.

This is a whole new sector for profit.

Chris Lowe: At our Strategic Trader advisory, you’ve identified some of the speculations that can outpace inflation.

It’s a corner of the market that not a lot of people are aware of. And some of the gains in the model portfolio are certainly well ahead of inflation.

Tell us a little bit about that.

Dave Forest: We’re big believers in commodities. We’ve done incredibly well on things like gold stocks and energy stocks.

We’re focusing now on what we’re calling “hard tech.”

Hard tech is a combination of hard assets and tech – two of the biggest trends in the world.

All the money pouring into the economy from government stimulus has its pluses and minuses. It has a lot of minuses… But the pluses are that it actually targets several sectors. One of the big ones is EVs [electric vehicles].

EVs are receiving billions, even trillions of dollars in government stimulus.

You put that together with the hard assets that are related to the EV boom… and that’s a dynamite combination.

We’re looking at things like battery metals. These are the metals that go into the batteries that feed the EV revolution. They are dug up in mine and have a limited supply. They represent the ground floor of the entire EV trend.

Chris: You’ve worked as a geologist. You’ve traveled around the world, looking for mineral resources. Tell us about where these metals are… how abundant they are… and how they feed into the ongoing EV boom.

Dave: There’s a whole bunch of different metals and commodities that feed into EVs…

We’ve done very well on lithium stocks. Lithium makes up the bulk of most EV batteries. There are several different designs out there, but lithium is key to most of them.

We’ve made 300% on a basket of lithium stocks that we’ve been following.

Also, nickel is in very short supply right now. Tesla (TSLA) just bought into a nickel mine in Minnesota.

This is how desperate the situation is getting – EV makers like Tesla are doing deals with mines. At this point it’s not even a mine, actually. It’s going to be a mine a couple years down the road. So, they’re trying everything they can to mine nickel.

There’s also cobalt, which goes into the cathode. Tesla also went all the way to Africa to do a deal for graphite, which goes into the battery anode.

Tesla is doing deals quietly all over the world, trying to secure battery metals. It’s worth following what they’re doing. If the world’s biggest EV company is trying to invest in these things, it’s something we should be looking at too.

Chris: What about copper? That’s also been on your radar. It did quite well last year, up 26%. I’ve been reading that a lot of copper is needed in EVs as well. Is that something you include in this hard tech category?

Dave: Absolutely. Copper is critical, to some degree, in the batteries… But more so in the wiring.

The average EV needs about 186 pounds of copper to make all the wiring that takes the electricity around the car.

But copper is not just needed for EVs. Copper wiring for electricity is related to most of the new energy generation. This is another sector that’s opening up with EVs, encompassing power generation, microgrids, renewable power, power management… And copper is the key to all of those.

And like you say, copper prices have been rising relentlessly lately.

They’re at or near all-time highs. And there’s a good reason to believe 2022 could be a breakout year for copper. We might see it go further to even larger all-time highs by a big margin.

That’s something every investor should be looking at as well.

Chris: This may seem counterintuitive, because we’re talking here about new energy sources from batteries and renewables…

But we’re also seeing big gains from the old, fossil fuel-based, energy sources. Coal and oil are rising in price a lot. How do those two things square off?

Dave: Did you know that coal prices are at record highs? This is not the end of fossil fuels. Around the world, oil demand is as high as it’s ever been.

The only big difference we’re seeing in the oil market is that supply is dropping off fast.

The Biden administration has been doing its best to cut down on new drilling around America – or cut it off altogether. So oil supply in America has been falling.

It’s starting to recover a little bit with higher prices. But remember, oil just passed $90 a barrel again, and it’s well on its way to $100.

We might be seeing rising oil prices for quite some time. That’s because the demand’s not going away… and the supply just isn’t there.

Here’s the interesting thing about the oil space: there will be incredible profit opportunities. That’s because there aren’t very many people who are investing in it anymore.

Many of the largest funds in the world now have mandates restricting them from investing in oil stocks.

If you’re an investor in the energy markets, you’re playing with fewer people.

If you want to be the smartest person in the room, just find your own room. If you’re alone in the room, you’re the smartest person. And you can see that in the dividend yields of some of these companies.

Super majors with hundreds of years of profit history are paying dividends from 8% to 15%, in some cases. And these are blue chip stocks.

Again, you’re looking for things that are going to put you ahead of that 7.5% cost of inflation. And that’s a safe dividend.

The bottom floor of the entire EV revolution is energy. The energy’s got to come from somewhere.

Renewables will be a part of that for sure. But there’s got to be baseload somewhere in there. [Baseload power refers to the minimum amount of electric power needed to supply the electrical grid 24/7].

Natural gas is certainly going to be a part of that. Recent proclamations from the EU and other groups have said that natural gas is a necessary part of the Green Revolution.

We’re also looking at nuclear power. There’s a growing recognition that if we want carbon-free baseload energy… nuclear is really the only option.

France just announced that they’re going to build 14 new nuclear reactors. That’s good for nuclear tech. And it’s good for uranium stocks – another hard tech commodity that feeds these trends.

All this is opening up a universe of profit opportunities, in both new and old sectors. They’re old – but they have a completely new life in this new economy.

Chris: You’ve just been on a road trip in an EV to test out some of this technology. How did that go?

Dave: We did a great American road trip across the U.S. We drove from Miami to San Diego in a Tesla.

The point was to see just how good it is. I mean, can you do a regular road trip in a Tesla? And it’s interesting…

Another big opportunity for us, where we’ve done really well, is charging infrastructure.

When most people invest in EVs [electric vehicles], they think about buying Tesla or Rivian – the companies that make the cars. But what about buying the companies that make the charging infrastructure?

I’m sure you’ve seen it. As we walk around, we see more and more of these charging stations in every city around the planet.

Somebody is putting those and maintaining them. And now we have ones that have screens and being used for advertising.

This is a whole new sector for profit.

We made 2,800% on a charging stock… a charging warrant, actually.

We can talk about warrants in a bit. But that’s our preferred way to play a lot of these things.

Charging is a massive opportunity. We realized that on our road trip.

As we went from Miami through Alabama… through Mississippi… through to Houston… we noticed how charging infrastructure is pretty good. You don’t have a problem finding chargers in most places.

When you get into the center of the U.S., around West Texas, there’s a big swath without good charging infrastructure. In fact, we ran out of power and had to get towed into Amarillo, Texas.

There just aren’t that many charging stations around there. It’s a huge opportunity for somebody to come and put in hundreds of thousands of these chargers.

That is a massive number. And we’re just talking in the U.S. When you consider the possibilities around the world, it’s no wonder charging stocks are up 2,800%.

I think they’re going a lot higher from here – especially the good ones.

Chris: Let’s talk about warrants. This is an area of the market that very few people are aware of.

You’ve been spreading the word on warrants as a way to speculate on some of the big themes, like EVs and the energy transition.

Why have you turned to warrants, instead of just investing in the stocks themselves?

Dave: First of all, warrants are how the richest people on Earth get richer.

I noticed that very early in my career. All the billionaires I worked with – and I had several of them finance companies I was involved in – always asked for these things called warrants.

Most of us know options. A warrant is like an option, except it’s issued directly from the company to an investor. So it gives you the right, but not the obligation, to purchase stock at a certain price.

The great thing about warrants is they’re usually significantly cheaper than the stock itself.

In some cases, warrants can cost just one penny. That means you can buy a lot more of them for less cash.

It’s a way that you can put in a small amount and have upsized exposure in case of a market move.

The warrants for the charging stock I mentioned made 2,800%. That was versus several hundred percent for the stock itself.

It’s a multiplier. Using warrants, you get this big upside.

We’re in a world now where there’s a lot of uncertainty. So you want to be able to put small bets on things that can go up a lot.

And the market could crash at any time. If it moves against you, you want to be ready.

One way to insulate yourself is to only have small amounts invested. So if the market does crash, you have time to recover.

The other great thing about warrants is they often have a much longer lifespan than options. Where an option might be one or two years, warrants often last from three to 10 years before they expire.

So, even in the event of a crash, you’ve got a lot of time to recover afterwards. That’s why we love warrants.

Chris: It sounds like you’re looking for these big trends – like the EV revolution and the energy transition – and then layering these warrant plays on top. And that gives an extra speculative spark to those plays.

Dave: Exactly. We research all of the stocks we recommend in depth.

Another reason to steer clear of some EV companies is that many of them aren’t actually making any money.

We look at the charging companies, and the companies that make EV safety equipment for example, as picks and shovels plays. Many of them are making good profits, and growing profits.

But the thing is, this is the early stage of the EV boom. So who knows?

Remember the first days of the internet. We all thought Bing was going to be the biggest search engine on earth and then it disappeared. Look at how poorly Yahoo has fared in that regard as well.

Nobody knows which of these companies are going to come out as winners.

Again, the way to play this is to place small bets on things that have a chance of rising significantly. And warrants are the perfect instrument to do that.

You don’t have to put $100,000 into something to have a shot at life-changing profits.

Even with a few thousand dollars invested, gains like 2,800% will have a meaningful impact in your portfolio.

Chris: I can imagine. I know you’re saving your warrants recommendations for your Strategic Trader readers.

But for someone who wants to invest in the EV boom, how can they pick up broad exposure to this trend, without getting too advanced?

For the general reader, who’s not yet a subscriber, what would your recommendation be?

Dave: The easiest “set it and forget it” way to profit from the EV and battery boom is the Global X Lithium and Battery Tech ETF (LIT).

It gives you exposure to lithium, and a broad range of the hard tech that we’ve been discussing.

It’s an easy thing to buy and have in your portfolio. And as the EV boom continues, it’s the ground floor.

Every EV is going to need all the stuff that’s in that ETF.

Chris: Does it invest in the metal itself, or in the mining companies that dig it out of the ground?

Dave: The mining companies themselves.

Chris: So it gives you a broad basket of these companies. And you’re not trying to pick a winner among them. You’re just getting exposure to the general trend.

Dave: Exactly. We have identified several of the companies in that basket as leaders. But this gives you an easy first step to get involved in the sector.

Get some money in. I would urge everybody to check out our warrants plays too.

If you’re interested, we’re having a free event, where you can come and learn about using warrants. Because for particular stocks, warrants will be the best way to profit from this big trend.

Chris: We’ll include a link to your upcoming event about warrants. If people want to join you there, they can learn more about the EV boom.

Thanks for taking the time to talk us through all those ideas. We’ll talk to you soon.

Dave: Appreciate it.